Is short-term lodging furnished to an out-of-state church youth group on a ski trip exempt from Colorado sales tax as a sale to a charitable organization?

Plain-English summary

A company that rents condominiums asked whether short-term lodging it furnished to an out-of-state church youth group — in Colorado skiing and holding evening meetings — is exempt from sales tax as a sale to a charitable organization. The Department's guidance: the lodging is taxable.

Short-term lodging is taxable; the charitable exemption is narrow. Colorado imposes sales tax on furnishing rooms or accommodations for less than thirty consecutive days (§§ 39-26-104, 102(11), 704; Reg. (39)26-102.11). Sales to a charitable organization, including a church, are exempt only when the sale is "in the conduct of their regular charitable functions and activities" (§ 39-26-718(1)(a)). The key is what the organization is doing, not merely who is paying.

The ski-trip example is directly on point. The Department quoted FYI Sales 1: a tax-exempt church must pay sales and lodging taxes to a hotel or motel if church members are on a ski vacation — even if the lodging is paid with a church check. By contrast, if the members are attending a religious seminar, the lodging can be exempt when paid with a church check or credit card bearing the church's name and individuals aren't reimbursing the church. The Department cited Security Life & Accident Co. v. Temple and Colorado Department of Revenue v. City of Aurora for the principle that exemptions are narrowly interpreted, and said it will critically examine exemption claims where the primary activity isn't directly related to the entity's principal charitable function. A youth-group ski trip is recreation, not a regular religious function — so the lodging is taxable.

Practical mechanics. When it's unclear whether to collect, the retailer should collect the tax and the lodger (the church) submits a refund claim (Form DR 0137). And to qualify as an exempt purchase over $100, the buyer must pay with the charitable organization's own check or credit card — not cash, a personal check, or a personal credit card.

What this means for you

Hotels, condo rentals, and other lodging providers

A church or other charity's tax-exempt status does not automatically exempt the lodging. Ask what the stay is for. Recreational trips (skiing, vacations) are taxable, even on a church check. Only stays in the conduct of the organization's regular charitable/religious functions (e.g., a religious seminar) can be exempt — and then only if paid with the organization's own check/card (over $100). When in doubt, collect the tax; the customer can seek a refund.

Churches and charitable organizations

Don't assume your exemption certificate covers a trip. Lodging for a ski outing or vacation is taxable. Keep the exemption clean by tying the stay to a genuine charitable/religious purpose, paying with the organization's own check or card, and not collecting reimbursement from individual members. If charged tax on a stay you believe was exempt, file Form DR 0137 for a refund.

Accountants and tax professionals

The exemption turns on "regular charitable functions and activities," read narrowly, with a primary-activity focus. The $100 payment-method rule (organization's own check/card) and the collect-then-refund default for unclear cases are the practical levers.

Common questions

Q: A church group booked our condos for a ski trip and paid with a church check. Do we charge tax? A: Yes. A ski trip isn't a regular charitable/religious function, so the short-term lodging is taxable — even when paid with a church check.

Q: When would a church's lodging be exempt?
A: When the stay is in the conduct of its regular charitable/religious functions — for example, a religious seminar — and it's paid with the church's own check or credit card, with no reimbursement from individual members.

Q: We're not sure if a stay qualifies. What should we do? A: Collect the tax. The church can submit a refund claim (Form DR 0137) if the purchase was in fact exempt.

Q: Does paying with a church check make it exempt? A: Not by itself. Payment with the organization's own check/card is required for exempt purchases over $100, but the activity must also be a regular charitable function.

Citations and references

Statutes, rules, cases, and publications:

• § 39-26-104, C.R.S. (tax on accommodations under 30 days); § 39-26-102(11), C.R.S. (accommodations); § 39-26-704, C.R.S.; Reg. (39)26-102.11
• § 39-26-718(1)(a), C.R.S. (charitable exemption — regular charitable functions)
• Security Life & Accident Co. v. Temple, 492 P.2d 63 (Colo. 1972); Colorado Department of Revenue v. City of Aurora, 32 P.3d 590 (Colo. App. 2001)
• FYI Sales 1 (lodging furnished to exempt organizations); Form DR 0137 (claim for refund)

Related rulings

• [[plr-10-005-private-letter-ruling]] — charitable/religious exemption hinges on use in regular religious functions
• [[gil-18-014-sales-tax-on-catering-by-charitable-organization]] — limits of the charitable exemption
• [[gil-18-006-taxable-nature-of-church-sales]] — when a church's own activities are taxable

Source

• Landing page: https://tax.colorado.gov/sales-use-tax-letter-rulings
• Original PDF: https://tax.colorado.gov/sites/tax/files/documents/GIL-09-007.pdf

Original ruling text

Office of Tax Policy
P.O. Box 17087
Denver, CO 80217-0087
[email protected]

GIL-2009-007
May 13, 2009

xxxxxxxxxxxxx
Attn: XXXXXXXXX
xxxxxxxxxxxx
xxxxxxxxxxxxx
Re: Taxability of room accommodations/exempt entities Dear XXXXXXXXXX, This letter is in response to your request for guidance on the taxability of living accommodations furnished to a church group. I apologize for the delay in responding to your request. The Department issues two types of written guidance: general information letters and private letter rulings. A general information letter provides a general overview of the applicable tax law and is not binding on the department. A private letter ruling is a determination of the applicability of tax to a specific set of circumstances and is binding in the department. A party requesting a private letter ruling must provide certain information and remit a fee. For more information about general information letters and private letter rulings, please refer to the Department's regulation 24-35-103.5, C.R.S., which is available on our web site at: www.colorado.gov/revenue/tax. We will initially treat your request as one for a general information letter. You may resubmit this request for a private letter ruling. Issue Are living accommodations of less than 30-days provided to a church group on a skiing trip exempt from sales tax? Background You provide the following information. Your company rents condominiums to a church group from another state. The members of the church who are renting the condominiums are a youth group and are skiing and holding meetings in the evening.

Discussion
Colorado imposes sales tax on the furnishing of rooms or accommodations for less than thirty consecutive days. §§39-26-104(1)(1), 102(11), 704, and department regulation (39)26-102.11. However, all sales to a charitable organization, including churches, are exempt when the sale is "in the conduct of their regular charitable functions and activities." §39-26-718(1)(a), C.R.S. The department has a number of publications available to retailers. For example, Department FYI Sales 1, address the taxability of lodging furnished to churches. In part, it states, For example, a church that has tax-exempt status would have to pay applicable sales and lodging taxes to a hotel or motel if church members are on a ski vacation, even if the lodging services are paid with a church check. If, however, the church members are attending a religious seminar, the lodging would be tax exempt if paid with a church check or credit card bearing the church's name, and individuals are not reimbursing the church. See Security Life & Accident Co. v. Temple, 492 P.2d 63 (Colo. 1972) and Colorado Department of Revenue v. City of Aurora, 32 P.3d 590 (Colo. App. 2001). Exemptions from taxation are generally narrowly interpreted. In general, the department will critically examine claims for exemption where the primary activity is not directly related to the exempt entity's principal charitable function. In cases where it is unclear whether tax should be collected, the retailer should collect the tax and the lodger should submit a claim for refund (Form 0137). You should also be aware that, in order to qualify as an exempt purchase when the price is more than $100, the buyer must pay with the charitable organization's own check or credit card, and not with cash or personal check or personal credit card. See, FYI Sales 1. Miscellaneous Pursuant to state law and department regulation 24-35-103.5, the Department will make public a redacted version of this letter. Your letter requesting this general information letter is not made public. I enclose a proposed redacted version of this letter. Please contact me within 60 days from the date of this letter if you have any questions, comments, or objection concerning the redacted letter. We hope this is helpful. As noted earlier, you may request a private letter ruling which will provide a determination regarding your specific circumstances.

Sincerely,

Office of Tax Policy
Colorado Department of Revenue

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